Cryptocurrency exchange FTX filed for Chapter 11 bankruptcy on Friday, and its CEO Sam Bankman-Fried stepped down.
It’s the highest-profile crypto platform to go under, dealing a huge blow to the industry’s credibility. Bankman-Fried was a leading voice for crypto in the nation’s capital, where he helped lawmakers write the first comprehensive bill to regulate it.
FTX’s collapse comes after it lent a reported $10 billion in users’ deposits to affiliated trading firm Alameda Research, which lost it all on risky bets.
The exchange was valued at a whopping $32 billion earlier this year.
FTX tweeted that bankruptcy was necessary for the company to “assess its situation and develop a process to maximize recoveries for stakeholders.” The proceedings include Alameda Research and FTX’s U.S. subsidiary. Bankman-Fried has claimed that U.S. users will not be impacted by the shortfall of funds.
“I'm sorry. That's the biggest thing,” Bankman-Fried tweeted Thursday. “I f---ed up, and should have done better.”
Binance, the largest crypto trading platform by volume, pulled out of a deal to buy FTX after reviewing its balance sheet and reading reports that the Securities and Exchange Commission and Commodity Futures Trading Commission are investigating whether FTX mishandled users’ deposits.
The demise of FTX is likely to have ripple effects on other crypto firms that relied on it to stay afloat. Crypto bank BlockFi, which received a line of credit from FTX in June, blocked users from withdrawing funds on Thursday.
Several crypto firms have gone under amid falling values. Crypto lenders Celsius Network and Voyager declared bankruptcy in July after blocking user withdrawals.
White House press secretary Karine Jean-Pierre called for more regulation on Thursday, telling reporters that crypto “risks harming everyday Americans” without proper oversight.